Europe’s contagion this year is more likely to be political than financial. But, with the euro’s solution set to take years, & the monetary engine overloaded, it’s time to crank up the fiscal side.

The avoidance of an extreme outcome in The Netherlands is reassuring markets. But, tensions with Turkey show where one country’s referendum spills over into another’s election. And the UK is opening the EU ‘trapdoor’ at one of the worst times politically.

Tackling the cause of the euro’s problems without stoking further social tension needs more than monetary expansion. To test whether the macro strains in the periphery are still holding back the core members, we update our ‘Misery Indices’ (MIs).

The zone’s MI should be its lowest since 2007. Also, reducing strains in the periphery & the relatively slower improvement in the core mean their unhelpful divergence since 2008 is correcting.

So, while far from fixed, the worst of the euro-zone’s macro strains looks behind us. Which is just as well, given the years it’ll take to fix, & - critically in 2017 - Europe’s highly-charged political year...